Tips for First-Time Filers

It's natural to feel a bit of trepidation when doing anything of consequence for the first time - and filing your taxes is no exception. Given the tax code's complexity, it's easy for beginners to question their aptitude.

Yet the truth is that there is very little to fear. Even first-time filers can painlessly complete their taxes if they're equipped with relevant facts and information.

To help you confidently approach this task, let's review some key tips for new filers.

Channel Your Inner Scout: Be Prepared

"Be prepared" is a motto that applies equally as well to tax preparation as it does to scouting activities. Having the appropriate documentation is a critically important aspect of doing your taxes.

When we talk about documentation, we're referring to forms and documents such as:

• W2s (the document issued by your employer to track your tax withholding)
• 1099-MISCs (a document issued to contractors or the self-employed that tracks payments)
• Copies of deductible expenses (receipts that can back up any expenditures you may claim)
• Other documents tracking income and expenses earned or incurred over the year
• By tracking and saving these documents as you go along, you'll be better prepared to file your taxes without worrying about bumping up against the April deadline.

Decide How You're Going to File

A generation or two ago, most people filed with pen and paper. Then, the IRS allowed taxpayers to file via telephone. Now, the process has been made even simpler through the use of approved tax filing software.

If your return is basic (no dependents, no stock portfolio, etc.), filing a paper form is the path of least resistance. It's inexpensive and only takes a few minutes to complete the necessary form. Also, if your Adjusted Gross Income is $79,000 or less, you can use the IRS Free File service to file online at no cost - a great option with built-in tools for tracking the status of a potential tax refund. 

If you plan on taking extensive deductions or have a more complex financial situation, using do-it-yourself tax software or the services of a professional might be worth the fee you'll have to pay.

Suppose you're going to file a paper form on your own. In that case, the 1040EZ is the go-to form for those with no dependents and basic tax situations - a description that fits many first-time filers. You'll need no dependents and a taxable income of less than $100,000 to qualify.

Familiarize Yourself With Essential Tax Concepts

Before navigating the filing process, you must understand the fundamental terms and concepts you'll encounter. Here is a short glossary:

• Adjusted gross income: all the income you receive over 12 months.
• Standard deduction: the amount of money the IRS allows you to deduct from your taxable income.
• Itemized deduction: if you don't take the standard deduction, you can list and then claim all your tax deductions - things like home mortgage interest and charitable gifts.
• Taxable income: what's left after deductions and adjustments are subtracted from your adjusted gross income.

Once you're familiar with the basic concepts and terminology related to tax filing, you'll be able to navigate the process with greater confidence.

The Takeaway

Filing your taxes for the first time doesn't have to fill you with anxiety. By understanding the basic ideas outlined above, you'll be able to complete the process quickly and painlessly and keep all the money you're entitled to.